Financial institutions, credit issuers, and payment processors have had months (perhaps years) to negotiate, document, and prepare for the launch of Apple Pay. You have had all of 3 days to digest, process, and consider what you’re going to do about the prospect of virtual wallets and contactless payments at your retail location or restaurant.
Mobile payments and wallets are not a new concept per se, but there is a push towards mainstream adoption that Apple is creating.
This means a few things will happen in the near future:
- Certain, significant interest from customers in fast, mobile checkouts, purchases, and orders.
- A shift in consumer expectations towards secure, near instant buying experiences
- A second wind for other contactless solutions like Smart Cards with EMV Chips and RFID chips
Do I really need to support Apple Pay?
If you question the ROI and logistics of upgrading your system to accept Apple Pay, step back and think of how Apple products typically fit into a market. Apple subsists on the successful adoption of whatever products they put out.
The iPod, iTunes, and iPad have succeeded thus far not because of a first to market pitch or because they were a lucky shot-in-the-dark. The tech giant had an exceptional attunement to the market’s willingness to accept and embrace the products.
The point? Apple Pay is here because there is viability for it. Apple's foray into payments is more than just a new solution. It harkens something far more wide-spread and representative of the current payments and processing climate.
For Apple, there couldn’t have been a better time to introduce Apple Pay:
- Security breaches have created a hunger for a more secure way to interact with merchants
- Pending fraud liability shifts will make EMV Contact terminals effectively the standard
- NFC is well documented and supported and is more secure than competing solutions
- One-click purchases and 2 day shipping have created an economy of instant gratification
Whether you’re still on the fence or ready to start upgrading, it’s worth understanding what accepting Apple Pay will mean for your business, system, and transactions.
Here are the 3 major things you will need to consider in coming months to be ready to accept Apple Pay transactions.
The 3 Things You Need To Accept Apple Pay
1. NFC-Enabled Contactless POS
Near Field Communication (NFC) is the way that the iPhone 6 and Apple Watch will communicate with your point of sale. It’s a small chip that is embedded in the top of the new iDevices that passes the secure information between the phone and your POS. Without this technology, Apple Pay just won’t work.
How do I know if my POS accepts NFC payments?
Assuming your device is fairly new, if you have any form of contactless payments going on you likely can accept NFC. For stationary point of sale systems and devices, check out your hardware (handhelds, countertop terminal, etc). If they have this symbol on them then they are probably NFC compatible.
To be sure, see your device’s full specs in its documentation. Look for a section on Mobile, RFID, EMV, or NFC transactions. Be aware that not all “Smart Card” and contactless readers are also NFC enabled.
If you don’t see this symbol, or are only using a magnetic card reader with no option for contactless payments, you will need a new device or an adapter.
Check out this Quest Duo handheld system that accepts 3 forms of payment: EMV, Contactless, and Magnetic Swipe.
Here are links to some example readers and peripheral providers to consider:
What if I use an iPhone or iPad with a card reader?
In this case, you cannot accept NFC payments unless your magnetic card reader also has an NFC reader built in. See the VeriFone’s PAYware Mobile family for some card reader / NFC enabled mobile add-ons. If you have your iPad or touchscreen POS stationary on the counter, consider the Ingenico iCMP, which would allow you to both accept Smart Card, Magnetic Strip, and NFC payments as well as connect with your stationary POS setup via Bluetooth.
As there haven’t been any announcements as to the next generation of iPads having NFC embedded, you will need an adapter or a separate contactless peripheral device for the time being. Check out the IDTech Express CM100 for a great, compact contactless reader to add to your system.
2. Compliance with upcoming regulations
If an enhanced user experience and keeping up with modern trends isn’t your thing, you may want to change your tune. With the major overhaul in fraud liability protection coming in October of 2015, major credit card companies (Visa, MasterCard, Amex, Discover) are changing their stance regarding fraudulent transactions.
The key focus? The blame for fraudulent charges will be shifted towards the merchant if the merchant does not allow for EMV (the gold computer chips on many credit cards) payment when a customer’s card was EMV-capable. If it's a fraudulent transaction, the bank is no longer liable, you are.
And it's no surprise... EMV “Chip and Pin” transactions have become something of a world standard.
How does EMV relate to Apple Pay? These chips are also capable of contactless payments. This means that where you can accept "contact EMV" payments, you can almost certainly accept contactless payments like Apple Pay.
Figures in the above chart do not report for the US because we are one of the last countries to migrate to EMV. Europe has 99% of terminals that are capable of EMV (and likely contactless) payments!
The liability shift has been widely covered and discussed since 2011, when Visa announced participation. If you are just coming into the discussion now, you should check out the EMVco’s website and the Smart Card Alliance. They provide tons of valuable information for learning about EMV, NFC, and general payment tech news and updates.
If you haven’t thought about how this affects your business consider that:
- POS hardware will all be capable of accepting contactless payments in the near future
- Much of point of sale software and apps will be changing as well to accommodate contactless functionality
- You will likely be making some form of contactless purchase within the next year.
While EMV compliance does not inherently mean that a device is NFC (and thus Apple Pay) compliant, as manufacturers ramp up production of new models, they will likely included NFC anyway.
The shift towards contactless payments is coming (quite soon) and Apple Pay is nearly here. The progression of events is fairly obvious from a hardware standpoint. But what about the transactions? Is your software capable of handling Apple Pay transactions?
3. Compatible Payments Processor / Gateway
As mentioned above, the hardware revolution is upon us. While upgrading to the new EMV standard will most certainly allow you to handle contactless, EMV, and magnetic reader transactions, Apple Pay functions via NFC and is not a part of the mandate.
The liability shift covers only contact EMV transactions that have 2-step authentication. Apple Pay replaces the 2nd step of authentication (the pin, the signature, etc) with Touch ID as well as other security measures, making it a non-standard function of future POS software and systems.
What does this mean for your system?
Apple pay requires a special handling of information that comes into your POS system. Your software needs to be able to decode the data from the phone and then submit it through the supported processor's API who is approved to function with Apple Pay. As such, only certain combinations of processors, banks, and transaction types will be supported initially.
Here’s an Apple diagram for developers that I modified to help you visualize the process:
Sound like a lot of restrictions on processing? It’s really not. There are six processors / gateways supported: Authorize.Net, Chase Paymentech, CyberSource, First Data, TSYS, and Stripe. This is a fairly representative initial rollout that covers the processing of most major credit cards, debit cards, as well as gift and loyalty cards.
With regards to card acceptance, anything from the 3 major payment networks (Visa, Amex, and MasterCard) issued by an increasing number of major banks will work. As far as initial launches go, Apple did it right in nabbing high-profile processors and financial institutions rather than going with a soft launch that only included one or two options within each category.
Can my POS software process Apple Pay payments?
Two questions need to be answered here:
- Does my software use a processor / gateway that is supported?
- Has my software developed, or are they developing, with the new Apple Pay API?
Is my software using a supported payment processor / gateway?
To answer this, you should check what options for payment processing are available “In App” or within the settings of your software. If you don’t see one of the 6 processors / gateways listed above, don’t fret. Just because your solution doesn’t use a processor directly doesn’t mean you are out of luck.
All of the processors and gateways have an affiliate program, which they will typically refer to members as an Independent Sales Organization (ISO) or Member Service Provider (MSP).
The differences and details of ISOs / MSPs are beyond the scope of this article, but what this means for you is that there are way more payment processing options than meet the eye.
It’s going to take a little bit of digging, researching, and emailing your solution to figure out who they use to process payments. For some examples of 3rd party offshoots of Apple-supported processors, check out the integrations and 3rd party services from Stripe and Authorize.Net.
Has my software developed, or are they developing, with the new Apple Pay API?
This is a far trickier question that will require some more research. Access to the APIs has just been released this week so there are hardly any companies that can truly offer you a software or app that can handle Apple Pay at this time.
Larger POS companies will likely have begun development ASAP on integrating Apple Pay’s and the supported processors’ APIs into their offerings, but it will be impossible to know if your current solution is moving in that direction without them either posting it to their website, or you asking them directly.
The key here is to follow your solutions blog / news bulletin and to keep an eye out for the impending flood of companies that will be touting their "Apple Pay Compliance".
There are some cultural stigmas and trust issues that need to be overcome before you see a significant influx of PassBook and Apple Pay transactions in your store. While I would say that there is significantly more interest in them after the Cupertino announcements, before the iPhone 6 and Apple Pay reveal, there was a significant gap in awareness of Mobile Wallets / Payments. In a Thrive Analytics survey, they found that 30% of adults haven’t considered using a mobile wallet.
What’s more, the primary concerns associated with those who were aware had to do with security and how easy they perceived cash, debit, and credit cards to be. These are 2 massive mindsets whose inertia will need need to be overcome by the general population before the “common consumer” will find Apple Pay to be a necessity.
Do you need to get setup now?
Physically (as in hardware), no. Mentally however, you should be preparing for and embracing these exciting shifts. While there is no substantial benefit for you to run out and buy an NFC-enabled device this minute, you will need to be ready for contactless (and at least EMV contact) payments sooner or later. October 2015 is pretty darn soon and over the next few months you will need to seriously consider upgrading your systems for the next year.
For the moment:
- Your software likely won’t be able to support these payments for a while
- The iPhone 6 isn’t even out yet, let alone tested, trusted, and in heavy use
- As manufacturers gear up for next year's liability shift, base models will likely have EMV compliance, contactless, and NFC capability. Innovation is on the way.
So in truth, you surely don’t need to get setup for Apple Pay just yet. But make no mistake: it’s coming, and fast. You will probably be upgrading your system in the near future anyway, so it’s worth your time to consider the inclusion of Apple Pay in your plans. If you want to be ready when it arrives in earnest, you’ll need to start researching now.
Related Post: What Apple Pay and iPhone 6 Mean for Your Business
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